TV Everywhere: An Independent View

I have a few friends who have “cut the cord.” And no, I haven’t told them to lose my number.

I have asked them to keep their receipts, though. And at the end of the year, we’re going to add up all the money they’ve spent on video product and high-speed data, as well as all the iTunes purchases, Netflix and Hulu Plus subscriptions, the cost of the Roku or Boxee boxes, and lifeline video subscriptions (yes, multichannel providers do still sell lifeline). I’ll bet each of them will have saved or spent an extra $200. If we get TV Everywhere right, I also bet each one of them reconnects the video cord next year.

Providing consumers with access to networks’ programming anytime, anyplace and on any device is the biggest moneymaking opportunity our industry has had since the introduction of the affiliate fee 30 years ago. By giving consumers more choice over how and when they view our content (and what they pay to view it), we will price-discriminate ourselves to higher profits. And our viewers will love us for it.

Although cable networks are eager to make their entire schedules available on TV Everywhere, licensing TVE rights from content owners has been problematic. Cable programmers, while cautiously building libraries of original content, license a substantial amount of the content they air. This is true for big network groups and small independent channels alike. Most of the licensed content comes from big film and TV studios, which are reticent to license TVE rights.

Can you blame them? Studios, like the rest of us, don’t yet know what TVE rights are worth. And while we all expect TVE to be a solid revenue source for all participants down the road, for now, nobody really knows. The distributors, eager to offer TVE as added value for video subscriptions, aren’t paying networks anything additional either.

So, how do we move forward? We start by including linear TVE and non-linear free-on-demand windows around exhibition days with the TV license. Specifically, these windows should extend for seven days around a movie exhibition and 30 days around a series’ episode exhibition.

Why these windows? Because that is where the majority of the catch-up viewing exists. According to Nielsen, viewing increases on average by single digits in the live-plus-3-days window, with an increase of as much as 24% for some networks in the live-plus-7-days window. And for series, a 30-plus-days window provides an opportunity to gain new viewers who may have not been watching from the start (think 30 Rock and Mad Men) but want to sample or catch up on the story later.

Extended windows also allow for truly incremental ad revenue. Even when Nielsen starts measuring TV Everywhere, it is likely to only capture the C3 period. But that’s OK. TVE will allow us to start getting paid for all the viewership after three days that is currently overlooked.

Once networks monetize that incremental inventory, we can begin to pay more for the TV licenses. But it’s going to take time. In the interim, in exchange for the TVE rights, I propose that we give our studio licensors a 15-second spot for promotional use in the inventory available for days four to seven in movies, and for up to 30 days in episodic series. And by committing to shorterterm deals, we can quickly meet our consumers’ demands and launch these services.

We all need to put viewers first. So, let’s stop arguing about rights for a marketplace that isn’t yet commercially viable so we can all begin to benefit from TV Everywhere now.

Chad E. Gutstein is chief operating officer of Ovation and a partner in the Arcadia Investment Partners/ Ovation investment vehicles that led the acquisition and financing of the network in 2006.